Future Group, Carrefour tie up likely

MUMBAI/NEW DELHI: Retail industry circles are abuzz with the possibility of an imminent tie-up between Future Group and the world's No 2 retail chain, Carrefour, after a hush-hush visit by the French chain's global chief executive, Lars Olofsson, to India late last week and his meeting on Saturday with Future CEO Kishore Biyani.

Mr Olofsson and Mr Biyani on Saturday visited a couple of Big Bazaar and Food Bazaar outlets in Delhi, said an executive privy to the development. The move is seen as a precursor to the announcement of a possible deal in the near future that will help Carrefour neutralise the early-mover advantage of its larger rival, Wal-Mart, which has already launched its India operations in alliance with the Bharti Group.

Thierry Garnier, executive director in charge of the international partnerships department of the E87-billion Carrefour, met Future Group director Rakesh Biyani and other top executives of the $2-billion group, the executive said, requesting anonymity. Mr Garnier also heads Carrefour's operations in southeast Asia, European countries, Russia and India.

Carrefour executives declined to comment. An email query sent to Carrefour almost 10 days ago on its tie-up with Future Group and leadership change at its India office did not elicit any response.

Kishore Biyani also refused to comment.

The talks between the two groups are centered around the possibility of a cash-and-carry alliance on the lines of the one between Wal-Mart and Bharti, another industry executive aware of the discussions said. Carrefour is keen on a food-sourcing joint venture, although both sides agreeing on a franchisee agreement looks more likely at present, said the executive, who asked not to be named.

Both Big Bazaar and Carrefour will operate in a parallel manner within the joint venture, he added.

Sameer Sain, chief executive and co-promoter of Future Capital Holdings—the financial services arm of Future Group, is seen as a key person in driving a possible partnership, given his relationships with the shareholders of Carrefour during his previous stint with Goldman Sachs. Future Agrovet, the group's Rs 1,000-crore staples and commodities sourcing entity, is expected to play a major role in the alliance, the second executive said.

A Swedish national fluent in French, Mr Olofsson took over as the CEO of Carrefour Group in January 2009. He has considerable experience in the global consumer markets and spent a major part of his 30-year career with the Nestlé Group.

Mr Olofsson is said to be extremely keen to catapult Carrefour to the top rung of the Indian retail segment. Carrefour executives have officially stated that Brazil, India, China and Russia will be the priorities in the French retail chain's long-term expansion plans. Carrefour's business has taken a hit, after its key western European markets were affected by the global economic downturn.

Big Bazaar contributes over 65% of the Future Group's total revenues and is its most successful store format. Future now operates 118 Big Bazaar stores, and wants to take the number to 350 by 2011. The group expects turnover from the back-end operations of Big Bazaar alone to be around Rs 18,000 crore by 2011, said an industry analyst.

Future Group's leading position in the Indian retail market in the front-end, sourcing, logistics and distribution is expected to help Carrefour build a strong position overnight in India, if the groups manage to seal a deal. Meanwhile, Carrefour has started booking properties in India, said a top real estate consultant. The French retailer's India arm is also setting up a real estate subsidiary, he said, requesting anonymity.

Carrefour had last year announced its intention to set up a cash-and-carry business in India. It is said to have blocked the site (land) for its first cash-and-carry store near Delhi. Accenture has been advising Carrefour on its India plans. The French group has also seen a change in leadership at its India unit twice in the past six months or so. Herve Clec'h, who led the India team for two years, was replaced by Luic Dubois early this year. Mr Dubois had a brief stint before being replaced by Jean Noel, the current head.